Sterling hits its highest level against euro since early December 2008

The pound today hit its highest level against the euro since 3rd December 2008, boosted by improved investor sentiment about the state of the UK economy. Stronger-than-forecast UK Services PMI figures, together with a report released by Nationwide which showed UK consumers were more optimistic in May than they had been for six months, boosted the pound. Today’s gains cap an impressive rally for sterling against the single currency, which has risen over 4.5 cents since 11th May 2009.

Pound loses ground against the euro yesterday

The pound weakened by 0.22 cents (0.19%) against the euro yesterday to close the day at 1.1590.

• Sterling weakened against the euro in early trading yesterday, after it was announced an Abu Dhabi government-owned firm had sold roughly £3.5 billion of Barclays shares. The bank’s shares fell about 13% in early London trade as a result, as confidence in the UK banking sector diminished. The FTSE 100 as a whole was down 1% mid-morning.
  
• However, poor eurozone unemployment figures, which showed a rise to 9.2% in April, did cap the euro’s gains to some extent. This was its highest level since September 1999.
  
• Nevertheless, the euro ended the day in positive territory against sterling yesterday as falls in London equities dragged the pound down. The FTSE 100 lost 29.17 points in the day.
  
• In trading so far today sterling has strengthened against the euro, as investors turn their attention to tomorrow’s interest rate decisions from the European Central Bank and the Bank of England.
  
• There are no major announcements due in the eurozone today, whilst in the UK Services PMI figures are out at 09.30 BST.

Pound's rally against the US Dollar continues

The pound continued its rally against the US dollar yesterday, rising by 1.34 cents (0.81%) to finish the day at $1.6577.

• In early trading the pound fell from seven-month highs against the dollar, as the news that an Abu Dhabi government-owned firm had sold roughly £3.5 billion worth of Barclays shares shook confidence in the UK banking sector. The FTSE 100 dropped 1% in early trade as a result, prompting traders to lock in profits after a sharp rally for the pound over the last month.
  
• However, the dollar’s modest recovery petered out just after lunch as US stock futures turned higher, helping to renew demand for higher risk currencies like the pound. Investors also drew heart from Monday’s better-than-expected manufacturing activity surveys coming out of China, the eurozone, the UK and the US.
  
• Sterling ’s gains were also extended following the release of much better-than-expected Pending Home Sales data in the US. This month’s reading of 6.7% was well-ahead of the 0.4% analysts had expected and also a healthy gain on the 3.2% registered last month. As a core driver of the global economy, news that the US housing market may be tentatively recovering was received positively by investors, prompting them to again look beyond the safe-haven of the greenback.
  
• In trading so far today the pound has resumed its rise against the greenback as investors continue to buy into the story the UK economy is on the cusp of recovery.
  
• In the UK, Services PMI data is out at 09.30 BST, whilst in the US, ADP Non-Farm Employment Change and ISM Non-Manufacturing PMI figures are due at 13.15 BST & 15.00 BST respectively.

Euro finishes up against the US dollar

The euro strengthened by 1.43 cents (1.01%) against the US dollar yesterday, finishing the day at $1.4300.

• In early trading yesterday the euro strengthened against the dollar, as improved risk sentiment continued to sweep the market. Monday’s better-than-expected manufacturing data from China, the UK, the US and the eurozone drove the single currency’s gains throughout the day, as investors speculated we may really be on the cusp of global economic recovery.
  
• However, the worst eurozone unemployment figures since September 1999 out mid-morning dampened investor demand for the single currency to some extent. Unemployment rose to 9.2% in April.
  
• But much better-than-expected US Pending Home Sales data stoked demand for riskier currencies like the euro. With the property market such an important driver of the US economy, this month’s reading of 6.7% was a positive sign it may be on the mend. Analysts had been expecting 0.4%.
  
• In trading so far today, the euro is slightly up against the greenback as improved risk appetite continues to sweep the market.
  
• There are no major announcements due in the eurozone today, whilst in the US, two important figures are set to be released. Firstly, ADP Non-Farm Employment Change data is out at 13.15 BST, followed by ISM Non-Manufacturing PMI data at 15.00 BST.

Aussie gains as risk appetite continues

The Australian dollar made small gains against sterling yesterday, as further upbeat economic data extended investor risk appetite and boosted demand for high yielding currencies such as the aussie.

• UK data revealed an increase in mortgage approvals for April, which continued to bolster hopes of a recovery in the UK economy.
  
• However, markets still remain cautious about the turnaround, so sentiment is likely to remain slow to move.
  
• Sterling was also hampered by a fall in UK share markets, largely driven by news that an Abu Dhabi consortium had sold a large stake in Barclays Plc.
  
• Investors will seek further clues today of a possible UK recovery from the release of Services PMI figures at 09.30 BST.

Kiwi dollar weakens off recent highs

The New Zealand dollar fell off recent highs yesterday as investors proceeded to book profits on strong gains, before recovering ground overnight amid growing risk appetite.

• The kiwi still remains supported by a lift in appetite for high yielding currencies, as the wave of optimism about an economic recovery continues.
  
• This suggests the kiwi could make further gains if the momentum continues.
  
• However, analysts have warned that some indicators suggest that the kiwi is already overvalued.

Pound finishes up over 1.5% against the euro

The pound strengthened markedly against the euro yesterday, rising by 1.82 cents (1.59%) to finish the day at 1.1612.

• In early trading yesterday, the pound strengthened against the euro as strong equity market performance buoyed investor confidence that the UK’s recession may be bottoming out. London’s FTSE 100 was up 1.5% mid-morning.
  
• The pound also strengthened on the back of improved UK housing data released by property company Hometrack. It revealed that for the first time in 20 months there has been no month-on-month decline. However, house prices are still 9.6% down on a year ago.
  
• The UK currency also gained on the news that the recession-battered manufacturing industry may be ‘close to turning a corner’ according to a survey released by The Chartered Institute of Purchasing and Supply. It showed that activity last month was at its highest level in a year, as it posted a reading of 45.4 in May, still below the neutral mark of 50 but an improvement on the revised 43.1 recorded in April.
  
• Strength on London equities continued to drive sterling higher yesterday afternoon. The FTSE 100 eventually finished the day up 88.25 points.
  
• In trading so far today, the pound has pared some of the gains it made yesterday as investors start to focus on Thursday’s interest rate decisions.
  
• There are no major announcements due in the UK or eurozone today.

Sterling soars to seven-month high against US Dollar

Sterling soared 2.56 cents (1.58%) against the US dollar yesterday to close the day at $1.6443.

• In early trading yesterday, sterling rose by over two cents against the greenback to hit a seven-month high as investor demand for riskier assets increased.
  
• Improved Chinese manufacturing data released overnight drove European equities higher mid-morning, prompting investors to look beyond the safe-haven of the dollar.
  
• Furthermore, better-than-expected UK housing and manufacturing data also drove sterling’s gains. Hometrack’s survey showed house prices in England and Wales were unchanged in May, the first time in 20 months there has been no month-on-month fall, whilst the headline Manufacturing PMI index came in at 45.4 in May, comfortably ahead of the 44.0 predicted.
  
• Sterling’s gains were further extended yesterday afternoon after the release of US ISM manufacturing data, which showed a slowing in the sector’s rate of contraction. It came in at 42.8, up from 40.1 last month.
  
• Strong rises on UK equity markets also fuelled sterling’s gains late yesterday. The FTSE 100 eventually finished the day up 88.25 points to close at 4506.19.
  
• In trading so far today, the pound has retreated from yesterday’s highs as investors turn their attention to Thursday’s Bank of England interest rate decision.
  
• There are no major announcements due in the UK today, whilst in the US, Pending Home Sales (MoM) are out at 15.00 BST.

Euro finishes very slightly down against US Dollar

The euro weakened slightly against the US dollar yesterday, falling 0.01 cents (0.01%) to close the day at $1.4157.

• In early trading yesterday, the euro rose against the greenback as investor appetite for riskier currencies continued.
  
• Strong gains on European equity markets mid-morning, buoyed by improving economic data, encouraged investors to look beyond the safe-haven of the dollar. The euro’s gains were also extended following the release of better-than-expected final eurozone PMI manufacturing index figures, which climbed to a seven-month high of 40.7 in May, up on the provisional estimate of 40.5.
  
• The single currency’s gains were also buoyed by the release of US ISM manufacturing data, which showed a slowing in the sector’s rate of contraction. It came in at 42.8, comfortably ahead of the 42.2 expected, further improving sentiment that a global economic recovery may soon be underway.
  
• However, the euro ran out of steam in late trading yesterday as some traders booked profits. It eventually finished the day very slightly down.
  
• In trading so far today, the euro has weakened against the greenback as investors brace themselves for the release of important US housing data, a core economic driver, later today. Pending Home Sales (MoM) are out 15.00 BST. There are no major announcements out in the eurozone today.

Investors favour pound over aussie

The pound gained over a cent in value against the Australian dollar yesterday as improved risk appetite in the market favoured the higher risk pound.

• News that China’s manufacturing sector expanded in May for the third consecutive month boosted optimism in markets.
  
• The FTSE 100 had a positive day, following earlier gains in Asia, finishing the day 2% up as investors risk appetite grew.
  
• As widely forecast, the Reserve Bank of Australia kept their interest rate on hold at 3% overnight – the central bank did however suggest that there is scope for further easing of interest rates in the future, which may put the Aussie under selling pressure.